How to set up a 50/50 real estate partnership?

[John Geldert]

Hey Bp looking for some more of your great advice/help.

So today a long time friend and I verbally decided to get involved in a 50/50 partnership. He would provide 100% of the capital needed for our venture and I would take care of everything else. The business plan is to initially flip homes then once we grow, to rehab and hold. I came up this this proposal along with a written business plan that he has already gone over. 

I already have a sole proprietor LLC set up and plan to set up one I believe as an "s" corp to include the partnership. I have been to Usleagal already and will have it set up through an accountant, but in the meantime I would like to get my friend/partner more info on our future LLC. I'm looking for any info on this topic. This entity is all new to me and appreciate any and all advice. Thanks!

[Eric M.]

Obviously to someone with access to other financing, 50/50 might not seem like a great deal.  To someone without access to other financing, it is a dream.  Rob insists that he won't give 50/50 to a money partner, yet I work with developers who pay me over 70% of profits for my financing.  This allows them to leverage like crazy.

It isn't always feasible to just tell your partner you want him to be a lender.  Maybe he doesn't want to lend to you at 8% plus points.  So you make the deal you can.

To address your original concerns, I would put the property in both of your names or even just his. That gives him the security he needs. The JV aggreement needs to address responsibilities, etc. but most importantly you need to address the worst case scenarios.

What happens if things go south and you walk away from the project?  (It happens.  People get injured, die, etc)

What happens if he can't come up with the ongoing costs of a project?

Think up all the possible things that can go wrong, address those and you should be ok.